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Hi Catherine,
I'm a Realtor and I list and sell REO properties in Southern California, and to my knowlege you are correct, the seller is responsible to pay the back HOA dues, and if they failed to, the new owner is NOT responsible. The HOA has legal recourse to go after the prior owner for any dues assessments that occurred when that person/persons owned the property. NOTE HOWEVER, it all depends on what the purchase contract says. The standard purchase agreement says seller is responsible to pay the HOA dues current at the time of closing (as well as any delinquent property taxes or other liens) and that title will pass free and clear to the buyer.
I am very confused how this could happen. If the buyer received a title insurance policy at the time of the purchase, which they would HAVE TO if the purchase was financed, then the title insurance company would not have let the sale close without the delinquent HOA dues (including late fees, etc.) being paid off in full at the time of the closing.
If the buyer looks through their escrow documents they should most likely have a title insurance policy, and by contacting that company the buyer should be able to find out what the heck happened.
Your purchase agreement should have contained verbiage stating that title would be passed free and clear to the buyer, and that HOA dues and property taxes would be PRORATED TO THE CLOSE OF ESCROW. If the seller failed to pay a delinquent amount, they may have been in breach of the contract, unless the seller's addendums contained language to negate the seller's responsibility to pay these items current as of the closing date. I have not heard of any REO sellers doing this, although I suppose it is possible.
You can start with contacting escrow and the title company to find out who screwed up, but if the HOA is dead set on pursuing the buyer for unpaid HOA dues, you want to deal with this head-on ASAP. It probably would be wise to get an attorney. Perhaps you can get one to simply write a letter to the HOA for a couple hundred dollars, and such an action may be enough to get them off the buyer's back without any further action and without any significant expense.
Good luck!
--David Santucci
--David Santucci
Nice post David, thank you. I'd only add that you need to separate the fees into 3 separate time periods:
1. Before the auction occurs - the prior owner is responsible for this, and any claim the HOA has was wiped out at auction. Some HOA's claim this isn't true and think their fees are super-senior. That is possible in some states, but I don't believe it is in CA.
2. Between the auction, and the transfer to the new buyer - the lender (or seller) should be responsible for this period of time, though you could agree to whatever you want in the purchase agreement.
3. The period after the resale - here the new owner is clearly responsible.
As David said, I'd start with the title co. If the HOA is coming after you and you got title insurace I believe they will actually work to resolve the issue on your behalf as that is what title insurance is for - protecting you from unwarranted claims on title.
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